Third-largest auto-producing state in the country? It’s Kentucky

Tom Martin talked with Dave Tatman, executive director of the Kentucky Auto Industry Association. Tatman completed 34 years with GM as plant manager for the Corvette assembly plant in Bowling Green. He also is an associate vice president for advanced manufacturing at Western Kentucky University and co-author of the book on leadership, Building Cathedrals: The Power of Purpose. Dave and his team are preparing for AutoVision, the association’s annual conference coming to the Lexington Center Sept. 12 and 13.

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A: Kentucky is the third largest state in the country with respect to automotive production, surpassed only by Michigan and Ohio in total vehicles produced per year. There are about 490 automotive manufacturing firms and related manufacturing sites around the state producing cars and trucks and parts for cars and trucks all over the world.

Q: Tell us about the AutoVision Conference.

A: One of the goals when we formed the association was to create a common venue annually where automotive insiders from all across the state, nation and around the world could get a glimpse into what the future of the automotive industry looks like both here in Kentucky and globally. So, we branded the conference AutoVision. Our first one last year in Louisville was sold out.

Q: And how is it looking this year?

A: We’re going to do it at the Lexington Center this year. We’re very excited about that because the Lexington Center offers us some additional opportunities for exhibitors and product displays, which is a big deal. And we are looking to sellout this conference this year as well.

Q: The auto industry now appears to be undergoing game-changing disruption.

A: It is. This is one of the greatest periods of time for the pace of change in the history of the automotive business. There are technology giants getting involved in automotive like Apple, Google, and Microsoft, and the OEMs (original equipment manufacturers) recognize the changing face of the automotive industry.

Q: There are some early signs that the importance of private car ownership may be softening. In the U.S. for example, the share of young people holding driver’s licenses dropped from 76 percent in 2000 to 71 percent in 2013. There has been over 30 percent annual growth in car-sharing members in North America over the last 5 years. How are new on-demand services such as car sharing and e-hailing options like Uber and Lyft, affecting sales?

A: When we turned 16, boy, we couldn’t wait to get out on the road. That just doesn’t happen today. Recognizing and understanding that, and embracing the growth of ride sharing and mobility services like Lyft and Uber are key functions of most automotive manufacturer strategies. We’re seeing partnerships develop with some of those ride-sharing services because those services still use vehicles and they put on lots of miles. So, we’re seeing an opportunity for the automotive industry to continue to thrive, just in a different way.

Q: Are you suggesting the emergence of a class of vehicles that would offer more endurance, better mileage and comfort much like a taxi cab?

A: Yes. It could be all of that. One of the fascinating things that we’ve come to understand about ride sharing and mobility services is that they open up a whole new dimension of people who may not otherwise be driving. So, for instance, my mom lives in an assisted living facility. Well, you know, those people don’t get out. But with ride sharing services all of a sudden there are all kinds of opportunities for people with limited mobility. It’s becoming increasingly prevalent for kids to have the Uber app on their smartphone. Instead of mom running them to soccer or band camp or dad picking them up after practice, they’re calling ride sharing services. So, there’s a lot of growth opportunity in underrepresented segments in the driving society today.

Q: We do a lot of shopping online these days, so less hopping in the car to run to the store or mall. Is this impacting sales?

A: It will have an impact on the automotive industry. Let’s not forget though that delivery services require vehicles too. Our forecast for automotive sales continues to be pretty robust.

Q: What kinds of technologies are reshaping the way cars and trucks are manufactured?

A: My passion is on the shop floor. When I walk into plants all over the state - it might be just an old steel building in Glasgow Kentucky, but when you walk inside, it’s a marvel of modern technology. One of the great things that’s happening is the “connected factory” or the Internet of Things and how the factory communicates in and of itself and with its customers and its suppliers. The quality of the communication systems today allow plant managers, supervisors, team leaders, people throughout the organization to know the status of the operation at a moment’s glance and literally on their smartphones. The operations talk to one another so that they don’t block or starve each other. We have a presentation from a local Kentucky firm at the AutoVision Conference on this whole notion of the connected factory.

Q: How is this technology impacting the workforce, existing and future?

A: Every automotive region in North America is challenged by workforce. We are finding increased demand for technological success in our automotive workers. No longer is it just ‘hang this bolt here and wait for the next one to come by.’ We are looking for their hearts, hands and minds as much as it used to be just their hands.

Q: What does that imply on the education side?

A: While there will always be the need for 4-year degrees, bachelor of science in engineering and others, I encourage kids to think alternatively. There are plenty of options and good high-paying, good-benefit jobs available without having to go to college. Students with a high school education can go into the positions that we have. We have great partnerships with our Kentucky Community and Technical College System; programs like KY FAME that brings students into the workplace simultaneously with educational programs that bring them up to a level of mechanical, hydraulic, electrical expertise that brings with it a degree of innovation that we really need in our plants.

Q: Is it now a given that the self-driving vehicle is coming soon and what is research showing on the consumer side? Skepticism? Acceptance?

A: This is a fascinating study for psychologists all over the world to watch. We definitely see the autonomous vehicle being part of the future. There’s no question about it. The advances that have been made, the technology that exists today is out there. The total attitude towards consumer acceptance is not fully understood yet because the breadth of autonomous is still just a conversation piece. In fact, for the AutoVision Conference we have several speakers that will look not only at autonomous vehicles and the impact they will have on our society, but also the regulatory environment that those vehicles are coming into.

Q: What is the industry’s view on the future of the electric vehicle?

A: The electric vehicle is also part of the future. There’s no question about that. We’re seeing great advances in electrical vehicles. A number of people in the automotive ecosystem underestimated the impact that Tesla was gonna have a number of years ago when it first proposed the concept, but they’re a very real competitor and one that is to be reckoned with.

Q: With innovation and product value increasingly defined by the software in the car, are manufacturers having to address new challenges like cyber security, data privacy, continuous product updating?

A: Yeah. That’s a real challenge. That whole notion of cyber security, and data breaching is an issue that we’ve never really had to confront in the automobile. But today, the automobile is sophisticated and loaded with microprocessors, computers, and other forms of electronics that control and govern the performance of the vehicle. It is a significant concern.

Q: Are all of these changes that we’ve been talking about likely leading to consolidation or new partnerships among existing manufacturers?

A: I don’t think we’ll see as much consolidation as we might have seen in the 2007, 2008, 2009 timeframe when this industry was in such crisis. But we will see a lot of collaborations, a lot of partnerships.

Q: In light of all this, what do you think the industry will look like 10, 15 years from now?

A: I’m not quite sure, Tom. I don’t think we’re undergoing an evolutionary change. I think this is a revolutionary change. I think you’re seeing a technological revolution in our plants, and in our products, and in our people. That is a great thing. A great thing for Kentucky, a great thing for America, and really a great thing for the global industry.

Tom Martin’s Q&A appears every two weeks in the Herald-Leader’s Business Monday section. This is an edited version of the interview. To listen to the interview, find the podcast on Kentucky.com. The interview also will air on WEKU-88.9 FM on Mondays at 7:35 a.m. during Morning Edition and at 5:45 p.m. during All Things Considered.